Nifty Futures strategic overview

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Interesting headlines from the major financial newspaper as on Saturday, 23 September 2017:

“D street bulls bear the brunt of Korea’s H-bomb threat” 

-The Economic Times

“Concerns over GST refunds, Korea tensions spook markets”

-The Business Line, Chennai edition

What are we trying to analyze?

Since the beginning of the year 2000, the Nifty 50 index has breached only twice, the average P/E multiple of 26, for the month for a brief period of time. The first time it traded above this was in the month of January & February of the year 2000 when Nifty 50 index made a high of 1818.15 (P/E of 27.12). From here it corrected for almost 20 months to make a low of 849.95 (P/E of 13.65) in the month of September 2001.

The second time it traded at such a high multiple was in was in the month of December 2007, when it after making a monthly of new high of 6185.4 closed at 6138.6 at an average P/E of 26.55. From there, it corrected for almost 10 months to a low of 2252.75 (October 2008). The average P/E for this at the end of the month was 13.77 and closing index at 2885.6.

Now, for the third time, this month, it has again crossed the average of 26, of the month, which is now at 26.13, Nifty 50 index is at 9964.3. The P/E ratio has to fall to a level to make it attractive for buying again and it can happen only in two ways. Either the price has to come down from this level or the less likely scenario of a very significant rise in earning of the companies from now.

The above fundamental analysis and the technical analysis, the self-explanatory weekly chart is given below, points to the fact that a significant top in Nifty 50 is in place and it is poised for a major correction which may last for weeks to come.

NIFTY50 -WEEKLY-220717
Nifty Futures weekly chart


I do not recommend any buy position in Nifty future till it closes above 10082 in this week. Sell it below the yesterday’s low of 9973 or near 10030-10040 region with a stop loss of 10086 for a positional target of below 9710 and intraday target of 9930 and 9887. Do not trade for first 15 minutes of the day.


nifty future-60 min-220917.jpg
Nifty Futures 60 min chart



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The author(s), or a member of their household, of this report, does not hold a financial interest in the securities of this company. The author(s) has followed “blackout periods” that prohibit analysts from trading securities of the companies they follow for 30 days before and 5 days after they issue a research report about the company, and prohibits analysts from trading against their most recent recommendations—subject to exceptions for unanticipated significant changes in the personal financial circumstances of the beneficial owner of a research analyst account. The author(s), or a member of their household, does not serve as an officer, director or advisory board member of the subject company. The author(s) does not act as a market maker/promoter/beneficiary in the subject company’s securities. The information set forth herein has been obtained or derived from sources generally available to the public and believed by the author(s) to be reliable, but the author(s) does not make any representation or warranty, express or implied, as to its accuracy or completeness.

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